Diamonds in the Rough: Reorganizing the Org Chart

I got an email the other day from an owner-advisor looking for help training an associate advisor to work directly with clients.

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I got an email the other day from an owner-advisor looking for help training an associate advisor to work directly with clients. Like many younger advisors, the employee didn’t know the firm’s planning software very well, but he knew how to create a financial plan and screen for investments that fit into individually designed investment portfolios. The problem was that he didn’t have any experience working with clients, but he didn’t have time to sit in client meetings. It’s a Catch-22 that prevents younger advisors from getting the training they need to become lead advisors, and keeps owner-advisors from increasing the client capacity of their firms and transitioning their firms internally.

My clients wrestle with the problem of training young advisors for face-to-face meetings with clients and learning the essential component of talking with the clients. We’ve used the traditional structure of a lead or senior advisor supported by one or two associate advisors who do much of the back-office work (see Figure 1). Yet, without a program for training the associates to work directly with clients, we were using the same illogical plan as the rest of the industry: hire a lot of associates and hope that one of them will be a super star and miraculously be able to work with clients.

So, a few years ago my research team and I set out to find a solution. The result is a rather radical reorganization of the traditional advisory firm’s organization chart into what we call “diamond teams,” which, to our surprise, turned out to be much more than a new organizational strategy: Diamond teams created a clear career path for young advisors, a succession plan for lead advisors and an exit strategy for owner-advisors. They have ended recruiting problems for our client firms, tied clients more directly to the firm and have significantly boosted firm productivity.

The concept of diamond teams is simple. Imagine a baseball diamond: On second base is a senior advisor, who is usually the firm owner or a partner; on first and third bases are lead advisors; and at the bottom of the diamond at home plate is a younger associate advisor (See Figure 2). This team is responsible for a group of clients, or in the case of a smaller firm, all the firm’s clients. The senior advisor works directly with the most important clients, usually around 20% of the group’s top clients, which frees the rest of his or her time for bringing in new clients and managing the firm. The rest of the team’s clients are then split between two lead advisors.

One of the unintended consequences of the diamond team structure is that it tends to encourage specialization among the lead and senior advisors. For instance, one may focus on financial planning while the other creates and manages the investment portfolios.

Most owner-advisors are easily sold on this structure at first. The resistance usually comes with the final piece: the role of the associate advisor at the bottom of the diamond, which ironically is the key to making the diamond teams work. Remember that the diamond structure was originally conceived as a solution for training young advisors to work with clients. We’ve found that the best way for them to get this training is to make their primary responsibility (80% of their time) to sit in all client meetings and take notes. In addition, they are responsible for any follow-up work (20% of their time) from those meetings, such as changes to client information or rescheduling appointments.

Yes, you read that right: For at least the first couple of years after younger advisors join the firm, they’ll essentially be getting paid to sit in client meetings all day and take notes. You can see why we might get a little pushback about this strategy. Most owner-advisors are looking for new associate advisors to leverage themselves and other lead advisors to work with more clients and bring in more revenue. In the long run, though, that’s a shortsighted plan: As we’ve seen in the example above, in our client work and in virtually very advisory firm in the country, it’s really a dead-end job for young advisors, who find it very difficult to move into a lead advisor role because they have learned nothing about speaking to and working with clients.

On the other hand, in the diamond team structure, associate advisors get to watch how lead advisors work with clients almost from day one. They get to know the clients and see how financial plans and investment portfolios are presented, how questions are answered, how problems are addressed and solved. After a while, they even get to start taking part in the conversations, slowly increasing their responsibility for parts of the client presentations and discussion, having never worked in the back office. After a few years of this kind of hands-on experience, firms find that their associate advisors are truly ready to start working with clients and on their way to becoming productive lead advisors—and eventually owner-advisors.

You can also see why it’s not hard to recruit young advisors to work with our advisory firms. One of the first questions that virtually all young advisors ask in job interviews is, “When will I start working with clients?” With the diamond team structure, the answer is “day one,” which makes those firms the employers of choice for almost every young advisor in the country who applies for a job. Because associate advisors are trained to work directly with clients, they can seamlessly be promoted to lead advisors, creating a career track that eliminates the need to hire expensive and yet unknown lead advisors from other firms.

What’s more, diamond teams are better for lead advisors as well. Because they are already handling either the financial plan or the investment portfolios for their clients, they require little or no prep time before they can go into client meetings. And, they don’t need to take notes or pass along a list of follow-up work to their associates—he or she was already in the client meeting with them. These efficiencies aren’t just on paper. Our experience shows that diamond teams substantially increase productivity in our client firms. One four-person team can work with between 225 and 250 clients with on average $200 million in AUM. That means, at least with our clients, one team of four people will generate about $2 million annually in revenue.

The teams create a career track for the lead advisors, too. When they are ready to take a larger role in recruiting more clients, they can split off to form their own diamond team or assume the senior advisor role in their existing team, freeing up the owner-advisors to focus exclusively on managing the firm as a step toward transitioning out of the firm altogether. The formation of additional teams creates a succession plan, whereby a growing number of senior advisors acquire increasing equity stakes in the firm, while at the same time assuming a greater portion of the rainmaking responsibilities.

Finally, we’ve found that the diamond team structure, by connecting each client to a team of advisors, virtually eliminates the risk of lead advisors leaving the firm and taking their clients with them. When combined with a more cooperative, productive organizational structure and clear tracks for advancement and firm ownership, the incentive for lead advisors to leave the firm at all is also greatly reduced. What started out as a program to better train young advisors ended up as a solution for many of the biggest challenges facing independent advisory firms today. Now, if you can just get over the “paying young advisors to only sit in client meetings” part.

Angie Herbers

Angie Herbers is founder and CEO of Angie Herbers LLC, FourPointe Consulting and Beyond U Inc. Advisor Growth Training. She brings over 17 years of experience guiding financial advisors to long-term, scalable growth by creating and executing holistic growth strategies to manage the eight areas of practice management: leadership, corporate finance, client service, operations, management, human capital, sales and marketing. For the past 12 years, Herbers has been a columnist with Investment Advisor magazine, a blogger for ThinkAdvisor.com and a frequent speaker at industry conferences. Investment Advisor named Herbers one of the “Top 25 Most Influential People in the Advisory Industry” in 2007, 2013 and 2015.

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